Steel Authority of India Limited (SAIL) experienced a significant drop in its share price, falling by nearly 6% on December 13, 2024. This decline ended a six-session winning streak and made SAIL the biggest loser in the Nifty Metal index.
Let’s explore the factors contributing to this decline, the broader market context, and what lies ahead for SAIL and the Indian metal sector.
The numbers behind the fall
On Friday, SAIL shares reached an intraday low of ₹121.90, marking a 5.8% decline. The stock is now trading about 31% below its 52-week high of ₹175.65 (May 2024) but has shown some recovery from its 52-week low of ₹102.15 (December 2023).
Here’s a snapshot of SAIL’s recent performance:
| Metric | Value |
| 1-year gain | 25% |
| Year-to-date (2024) | -1.50% |
| November 2024 growth | 2% |
| December2024 decline | 4% |
Global factors driving the slump
China’s economic policies
SAIL’s performance is heavily influenced by global metal markets, particularly trends in China, the world’s largest consumer of metals. Recent developments include:
- Weaker Yuan outlook: Reports suggest that China may devalue its currency further against the US Dollar.
- Uncertain fiscal measures: China plans to expand its budget deficit and introduce stimulus measures, but the specifics remain vague.
- Economic challenges: Weak domestic consumption, a property crisis, and mounting debt are adding to China’s struggles.
These uncertainties have caused a cooling in global metal prices, amplifying the pressure on metal stocks like SAIL.
Weak Nifty Metal index
SAIL’s decline is part of a broader weakness in the Nifty Metal index, which fell by over 2%. Key contributors included:
| Stock | Decline (%) |
| NMDC | -3% |
| Hindustan Copper | -3% |
| JSW Steel | -3% |
| Tata Steel | -3% |
Other players like Vedanta, Hindalco, and JSPL also saw losses ranging from 1-3%.
Analyst downgrades add pressure
Morgan Stanley’s ‘Underweight’ rating
SAIL’s decline was further fueled by Morgan Stanley downgrading the stock to ‘Underweight’ and issuing a revised target price of ₹115, well below its 52-week high.
Also read: NMDC Shares Decline 4% Post Q2 Earnings Announcement
Broader concerns
Analysts point to mounting debt, operational inefficiencies, and prolonged capital expenditure as key challenges for SAIL. For instance:
- Gross debt: Rose by ₹5,000 crore sequentially to ₹41,380 crore in Q1 FY25.
- CapEx intensity: SAIL is undertaking significant CapEx to reach an installed capacity of 35mtpa by FY32, which could strain its balance sheet.
- Target prices: Analysts have revised their target prices downward, with some as low as ₹98.
Market volatility: What’s next for SAIL?
Despite the decline, SAIL has shown resilience in certain areas. Its Q1 FY25 EBITDA rose by 12% QoQ, driven by lower input costs and higher non-steel sales. However, pricing pressures and muted volume growth remain challenges.
Analysts suggest that if SAIL’s share price breaches the ₹110 mark, it could drop further to ₹99. Investors are advised to maintain a strict stop loss below ₹110.
You may also read: What led Metropolis Healthcare to reach its 52-week high?
Broader sector outlook
The China connection
The Indian metal sector’s performance is closely tied to China, a dominant force in global metal demand. As China’s economic policies continue to evolve, Indian metal stocks may face continued volatility.
Also read: All you need to know about Vedanta’s Demerger
Key trends to watch
- US-China trade tensions: The trajectory of this relationship could significantly impact global trade dynamics.
- China’s stimulus measures: Details on fiscal support could stabilise the metal market.
Conclusion
SAIL’s 6% decline on December 13 highlights the vulnerabilities of Indian metal stocks to global trends, especially those linked to China. While SAIL’s long-term growth plans are ambitious, immediate challenges like high debt, volatile prices, and weak demand loom large.
For investors, staying updated on global economic developments and SAIL’s financial metrics will be critical in navigating this period of uncertainty.
Stay tuned for more updates on SAIL share price..
